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November 2, 2011

The Rise Of The Virtual Cable Company

by WICT Mentoring Blog

by Dave Morgan, Oct 6, 5:31 PM

Yesterday, Microsoft announced that its Xbox 360 would now carry free and subscription services in most major markets around the globe. Beyond gaming and Netflix and Hulu, which have been part of Xbox for some time, the connected gaming console will now carry channels like ESPN, HBO, Bravo, Syfy, BBC and services like Comcast Xfinity, Verizon FIOS and TT&T and previously Web-based content like Google’s YouTube.

For all of the talk of potentially disruptive Over-the-Top TV services, this is probably the most significant move we’ve seen since Netflix and Amazon launched their streaming services. Am I being a bit extreme? I don’t think so, and here are my reasons why:

Xbox already proven platform for TV viewing. Connected Xboxes today are already used for TV viewing on average of one hour per day. That dwarfs the average Americans Web video viewing by by a factor of 10. More great content on that platform will only drive that number, and ratio, higher.

Beginning of the end of cable company proprietary set-top boxes. It is significant that several of the largest multichannel video distributors have signed up on the Xbox deal. I’m sure many of them would like to be out of the consumer hardware business. Just wait until we see large volumes of smart, connected TVs. They will become like Xbox too.

Could herald a la carte channel purchasing. With ESPN and HBO doing deals here, how long can it be before other, must-have networks, offer their channels on a stand-alone basis – AMC and “Mad Men,” anyone?

Fast path to major ad revenue steam for Microsoft. Steve Ballmer has made it clear for years he aspires to eventually drive 25% of the company’s revenue from advertising. Online is not likely to satisfy that goal. TV and it’s big dollars just might. Don’t underestimate what a company like MSFT might do to finally achieve that big audacious goal.

What do you think? Is Microsoft on a path to being our first virtual cable company?


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